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Fortescue Metals GroupBalancing the Supply Demand Curve
The New Force in Iron Ore
8th China International Steel & Raw Materials Conference
Qingdao, October 2008
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DISCLAIMER
Important NoticeThe purpose of this presentation is to provide general information about Fortescue Metals Group Ltd ("Fortescue"). It is not recommended that any person makes any investment decision in relation to Fortescue based on this presentation.
This presentation contains certain statements which may constitute "forward-looking statements". Such statements are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward-looking statements.
No representation or warranty, express or implied, is made by Fortescue that the material contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each of Fortescue, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission therefrom. Fortescue accepts no responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person nor any obligation to furnish the person with any further information.
Fortescue Metals Group Ltd
COMPETENT PERSONS STATEMENT
The geological information in this presentation is based on information compiled by Mr Stuart Robinson, and by Dr John Clout. Mr Robinson and Dr Clout are both fellows of The Australasian Institute of Mining and Metallurgy and are both employees of Fortescue Metals Group Ltd. Mr Robinson and Dr Clout both have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for reporting of Exploration results, Mineral Resources and Ore Reserves’. Mr Robinson and Dr Clout consent to the inclusion in this presentation of the matters based on the information in the form and context in which it appears.
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FMG Overview
• Long term growth in China and Asia drives FMG strategy
• FMG has major reserves and resources with very strong exploration upside
• World class production assets commencing in the bottom quartile of cost curve
• Strong off-take partners demand more FMG ore type
• We are here to help China
Multi-decade China market growth drives FMG strategy
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Further Promising Long-Term Growth Prospects for China
Japan and Korea provide a clear roadmap to China’s potential– China early in its growth cycleChina’s economic growth averaged over 10% per annum from 2003 to 2007– China GDP expected to increase by 10.5% in
2008– Public works spending (airport, roads, water
systems) of US$400 billion through 2010– Shanghai spending US$40 billion for 2010
World Expo
China’s growth expected to pickup again to normal levels post the olympic industrial slowdown
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1,000
1,200
0 3 6 9 12 15 18 21 24 27 30 33
Years from base
Inde
x, b
ase
year
= 1
00
Korea base 1980 Japan base 1959 China base 1996
Industrial production index
Source: The Economist (2008).
China’s industrial development is just beginning which has significantimplications for further iron ore seaborne trade growth and increased
infrastructure spending will further translate into more iron ore demand
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History remains the best guide to the futureF
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Combined Chinese and Indian urbanisation rates per year
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5
10
15
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25
30
3519
50-5
5
1955
-60
1960
-65
1965
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-75
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2010
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2035
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2040
-45f
2045
-50f
mill
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IndiaChina
Source: United Nations, McKinsey, Macquarie Research, September 2008
China and India Urbanisation
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Chinese Urbanisation
452467
482497
512527
542
811 805 798 792 784 777 770
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825
2000 2001 2002 2003 2004 2005 2006
Urban population Rural population
\
Urbanisation Curves Chinese Population
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0 2000 4000 6000 8000 10000 12000 14000 16000
China Middle Income South Korea India
% Population Urban
GDP per Capita (2000 US$)
Million People
China is the perfect example of an urbanising country where raw material demand has increased significantly due to its population shifting to cities from rural areas
Source: World Bank. Source: World Bank.For
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Mon
thly
RO
M P
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t)
Strong production growth 2004-06
Growth rate slowedsharply 2007-08
Growth rate in Chinese iron ore production slowed sharply in 2007-08
Source: Morgan Stanley
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Source: Tex Report; FMG
Infrastructure constraints limits Australia, leads to falling market share
China requires Australia to recover Market Share
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Year
Chinese Imports by Source
AustBrazilIndiaS.AfricaOthers
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Proven Track Record in Project ManagementTo Reality
Fortescue Mine Site - 2008
From Concept
Fortescue Mine Site - 2006
Fortescue Rail Site - 2008Fortescue Rail Site - 2007
Fortescue Herb Elliot Port - 2008Fortescue Port Site - 2007
FMG built its major
infrastructure faster than any other mining company has
ever done before
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State-of-the-art Mining operations
Excavator in actionOverburden
trucks
Ore trucks
Surface miner in action
OVERBURDEN
ORE BODY
ORE BODY
Target - Lowest cost, highest efficiency in the Pilbara
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Cloudbreak time lapse of construction4 June 2007 to 18 July 2008
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State-of-the-art Rail operations
Target - Lowest cost transport in the Pilbara
Rail
• Clean sheet design captures best of existing technology and takes it to the next step:
– Bigger carrying capacity
– Electronic braking system
– Aerodynamics
• 40 tonne axle loads
• Low centre of gravity, long wheel base, means capable of higher speeds
• Shorter distance means shorter cycle times
• Designed with reduced maintenance costs in mind
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State-of-the-art Port operations
Target - Lowest cost transport in the Pilbara
Port
• Significant expansion area
• Highly automated
• Extensive use of conveyors
• Largest shiploaders in Australia
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Port time lapse of construction8 May 2007 to 15 May 2008
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The growth engines of Asia need the Pilbara
• No iron ore major has the expansion leverage of Fortescue
• Australia is the most competitive supplier to Asia
Lowest Sovereign Risk
Best Location
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Cumulative Production Capability - Dry Mt
US$
/dry
ton
ne in
rea
l ter
ms
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0
0 100 200 300 400 500 600 700 800 900
Port LoadingRoyaltyTransportMaintenanceSuppliesElectricityFuelLabour
Kum
ba I
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Ore
non
-Agg
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CSN
non
-Agg
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CVR
D n
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etal
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NM
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CVRD
Pel
lets
Clev
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Rio
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LKAB
Pelle
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US
Stee
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Arc
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Mitt
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Analysts prediction for relative operating costs – Seaborne trade
Iron Ore Cash Costs for 2009 - Saleable Mine and Pellet by Company
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• The largest bedrock hosted iron ore discovery in Australia
• Over 1.6billion tonnes of reserves defined
• New exploration (Chichester only) 1.8 Bt – target only
• Total reserves, resources and targets (Chichester only) under current drilling 4.26 Bt
Project pipeline underpinned by geology
Note:- Total resources are exclusive of total reserves- Data derived or calculated from best available company, technical and government public report Note: Targets are hypothetical estimates and may not be achieved
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FMG Pilbara Holdings Dwarfs OthersFMG – 52,000 sq. km, Rio – 11,000 sq. km, (Robe 5,000 sq.km) BHP – 6,500 sq. km
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Fortescue’s first commercial shipments arrive in China –May/June 2008
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Fortescue’s first commercial shipments arrive in China –May/June 2008
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Product Acceptance
Actual shipments as at end September 2008:
– 8.7mt shipped, 53 ships to 27 customers
– Cargo value to date more than US$661m
– Fe and SiO2 on target, Higher calcined Fe
– Customers are reporting very strong results from FMG ores in their blast furnace blend
– Several Chinese steel mills wish to use more than 30% FMG Rocket fines in their blend
THANK YOU TO ALL OUR CUSTOMERS
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Industrial Test Results from FMG Major Customers so far …
Project Yield %
Sinter Speed mm/min
Productivity t/m2.h
Fuel kg/t
Tumble Index %
Return Balance
Base Blend 68.84 19.34 1.232 72.80 67.47 0.92
Replacing 22% MAC Fines
65.89 20.77 1.304 70.62 65.07 1.03
Replacing 19% Brazilian fines
65.09 21.88 1.339 72.20 66.93 1.04
Rocket Fines Replacing Brazilian Fines & MAC Fines in the Sinter Blend
“…The blending of Rocket Fines is conducive to increasing both sinter speed and productivity. Rocket fines can comfortably make up more than 15% of total sinter blend. Increase of Rocket fines percentage in the sinter blend is likely with more technical work…”
- WISCO General Iron Plant
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Brazilian Fines
Domestic Concentrate
Others Canadian Concentrate
Indian Fines
Iron Scale
FMG Rocket Fines
Other Fines
MGI Fines
Total
20 14 20 5 3 4 22 2 10 100
Sinter Blend
Industrial Test Results from FMG Major Customers so far …
Daily Production t Tumble Index % 5-10mm % -5mm %
10728 76.89 24.64 4.69
Major Indicators
“…Daily production is increased by more than 50 tonnes on three 105m² sinter machines with steady tumble index, powder material (screening index) decreased by 0.2%...”
- Laiwu Steel
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Why are FMG Fines so good?
• High calcined iron
• Low contaminants
• Coarse size with low ultrafines
• Very fast sintering speed/high production rate (“Fires like a rocket!”)
• Mills can use it up to 50% of a blend, versus 15% maximum for MAC, 35% Pilbara Blend
• Less sensitive to over-melting compared to Yandi
• Stable uniform sintering characteristics
Conclusions: High Value In Use for steelmillsPositive customer feed-back not surprisingTenacious product
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Exploration - 4.1 Billion tonnes in 4 years
• Christmas Creek drilling commenced May 2004; Cloudbreak,
November 2004, Solomon Drilling commenced June 2007
• In-ground resource of 4.1 billion tonnes
• Reserves now 1.65 billion tonnes
• Discovery cost under 2 cents per tonne
• The next 3 billion tonnes is targeted
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Western CID
Southern PilbaraEastern Pilbara
FMG Chichester project
Project Pipeline development areas will create a large iron ore export operation
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Hamersley Group Stratigraphy– Regional
Macroband Lateral Continuity
75km50km
190km
170km
~ 50 m
Brockman 2 Hamersley Iron
reference section
Tom Price
Type outcrop – Wittenoom Gorge
BHPB
reference section
Mt Whaleback
4W Gorge Ophthalmia Range
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Pilbara resources and targets which underpin the project pipeline
Area CurrentResources*
Current Targets
FurtherPotential
Total Upside
Chichester Range 2.45 1.8 1 5.25
Solomon 1.7 2 2 5.7
Jeerinah Anticline 1 1.5 2.5
Western CID 1 1 2
Southern Pilbara 0.5 0.5 1
Eastern Pilbara 0.5 1 1.5
Magnetite 2 >1 >3
Total 4.15 8.8 8 20.95
All figures are billions of tonnes of iron ore
Note: Targets and further potential are hypothetical estimates and may not be achieved
* Indicated and inferred categories
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From ConceptFortescue Mine Site - 2007 Fortescue Mine Site - 2008
To Reality
Fortescue has Australia’s leading mining and infrastructure operations team
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Pilbara’s longest corporate airfield
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Surface miners hard at workF
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Trucks loading fastF
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World’s largest radial stacker at workF
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Mine: 24/7F
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Integrated Crushing & Screening PlantF
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Train Loader in operation
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From Concept
Fortescue Rail Site - 2007
To RealityFortescue Rail Site - 2008
Fortescue has a proven rail operations team
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Rolling stock (particularly wagons) have exceeded expectations
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Train unloader from Rail to Port -fully operational
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From Concept
Fortescue Port Site - 2006
To RealityFortescue Herb Elliott Port - 2008
Port and loading systems
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A massive footprint - inbuilt expansion capacity
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Stacker & Reclaimer - fully operationalF
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Port: 24/7
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160 mtpa expansion map
Newman
Dampier
Port Hedland
50Kms
Point Samson
Tongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt Nicholas
Christmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud Break
Mt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt Lewin
Glacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier Valley
Fig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig Tree
White KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite Knight
FlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomon
Flying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwana
Glacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier ValleyGlacier Valley
Tongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkTongololo CrkMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt NicholasMt Nicholas
Mt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt LewinMt Lewin
Christmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekChristmas CreekCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud BreakCloud Break
Fig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig TreeFig Tree
White KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite KnightWhite Knight
FlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersFlindersSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomonSolomon
Flying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishFlying FishEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwanaEliwana
FMG TenementsOre Processing Plant
FMG Rail Extension
LEGEND
Other RailFMG Rail
FMG Kennedy Rail
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160+ Mtpa Anderson Point
5 x Cape size 3 x Rail Loop3 x Train Unloader160+ Mtpa stock yard expandable to 200+mtpa
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Australia-China Iron Ore Trade
• Australia is the most reliable, lowest sovereign risk, highest value-in-use supplier of critical raw materials to the growth markets of Asia, especially China.
• FMG is the best ‘win/win’ supply option for the Chinese Steel Industry
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FMG wishes to express our sincere support for the Chinese Steel Industry in these difficult times. We believe we will successfully work through this together.
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For regular email alerts register online at www.fmgl.com.au
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